On the front-page of the July 4 Raleigh News & Observer we read:
A bank whose board chairman is Durham Mayor Bill Bell has agreed to overhaul its operations after running afoul of federal and state regulators.We obviously don’t have very important information regarding what the bank’s been doing that led the FDIC and the NC Office of the Commissioner of Banking to take such unusual steps including citing the bank for “inadequate management” and "violating the law," and its board of directors for failing to provide “adequate supervision.” But these are extremely serious matters that I hope the N&O will continue to follow and report.
Mutual Community Savings Bank has agreed to an order that, among other things, calls for it to stop operating with "inadequate management" and "in such a manner as to produce net operating losses."
The order does not mean the bank is shutting its doors. "We're still in business, and that is the bottom line," Bell said Tuesday.
Mutual was founded 86 years ago by African-American businessmen, providing a financial lifeline that helped to create a black middle class during the decades of Jim Crow. It also was one of the anchors of Durham's famed "Black Wall Street." In addition to the mayor, its board includes prominent citizens, including two pastors and the provost of N.C. Central University.
The bank has been under a regulatory cloud since it disclosed in May that it had received a proposed cease-and-desist order from the Federal Deposit Insurance Corp. and the N.C. Office of the Commissioner of Banks.
According to the order, which Mutual filed with the Securities and Exchange Commission, regulators have "determined there is reason to believe the bank had engaged in unsafe or unsound practices and committed violations of law and regulations." Similar language is frequently used by the FDIC when it issues such an order.
Joe Smith, the state banking commissioner, and FDIC spokesman David Barr declined to identify the practices.
The order notes that Mutual Community has neither admitted nor denied any charges. The order calls for Mutual Community to stop:
* Operating with inadequate management.
* Operating with a board of directors that hasn't provided "adequate supervision."
* Operating with inadequate capital and reserves.
* Operating at a loss.
* Operating with inadequate information technology.
* Violating law, regulations, and policy as identified in an FDIC bank examiner's report which has not been made public. Such reports contain sensitive financial information and are exempt from the Freedom of Information Act, said the FDIC's Barr.
Bell and the bank's CEO, William G. Smith, declined to comment on the alleged violations -- or any other specifics of the order. Efforts to reach other board members failed.
"We're working on a lot of different things to return the bank to profitability," Smith said.
Bell said that the board hasn't yet decided whether management will be overhauled.
Mutual recently disclosed, without explanation, that Albernard Bass Jr., the bank's senior vice president and chief operating officer, has resigned effective July 13. Bass couldn't be reached for comment Tuesday.
Smith said Bass left to consider other opportunities and his departure was unrelated to the order. . . .
According to the order, the bank has to evaluate whether its senior executives are qualified "to perform present and anticipated duties." The bank also must make a plan to "recruit and hire any additional or replacement personnel" within 60 days.
Any executives hired by the bank would have to be approved by the FDIC's regional director, Mark Schmidt.
The bank also must adopt a plan to boost its capital, which can include selling stock, and improve its earnings. And it must submit quarterly progress reports to regulators and adopt an "educational program" for training board members.
Bell has announced that he will seek reelection to a four year term this fall. He’s expected to have opposition, most likely from city councilman Thomas Stith. Right now Bell would be a heavy favorite in such a race.
According to a side bar that accompanies the article, one of the two pastors serving on the bank’s board of directors is Bishop Elroy Lewis, pastor of Fisher Memorial United Holy Church.
From the time the Duke Hoax first broke, Lewis has been active in support of what NC NAACP chair Rev. Dr. William Barber II has called his organization’s “monitoring of the Duke rape case."
The N&O side bar states Lewis received $4,250 in 2006 for his part in failing to provide “adequate supervision” of the bank. ( Well, the N&O didn’t really say it that way but you can bet that, in fact, is what actually happened. – JinC )
The NC Central University Provost serving on the bank board is Dr. Beverly Washington Jones. She’s a former member of the Durham Public Schools' board of education (an elective office in Durham) and well-connected with the politically powerful Durham Committee on the Affairs of Black People. The N&O reports her board compensation in 2006 was $4,500.
Bell, as bank board chair, received $7,500 for his 2006 service.
You can read the entire N&O story here.
The Durham Herald Sun has so far said nothing about the Durham bank's problems and the FDIC and NC Office of the Commission of Banking’s actions.
Another day in Durham.